Amazon’s Echo and Alexa are expected to lose $10 billion this year.

Amazon’s Echo and Alexa are expected to lose $10 billion this year and there is no clear plan to stem the bleeding.<br><br>The division is on life support, but CEO Andy Jassy plans to keep it alive.<br><br>The Information:<br><br>Amazon CEO Andy Jassy is increasingly expected to announce major cost cutting plans tomorrow.<br><br>But one division that looks like it will be spared the worst of the cuts is the Echo and Alexa business, which is hemorrhaging money at an alarming rate.<br><br>The Echo and Alexa business lost around $3 billion in 2018, $5 billion in 2019 and nearly $6 billion in 2020.<br><br>In 2022, those losses soared to $9.3 billion.<br><br>This year, Alexa is on track to lose a staggering $10 billion.<br><br>But despite this bleeding, Jassy told senior Amazon leaders last month he has no plans to shut down Alexa.<br><br>Jassy said at the meeting he plans to keep investing in Alexa in the hopes it becomes a smart home and connected device business that can generate more money. <br><br>Insiders have told The Information the Alexa business is on life support, and there is no clear plan to stop the bleeding.<br><br>One issue is Amazon’s failure to generate sales from skills, which are basically apps built for the Echo smart speaker.<br><br>Insiders estimate that developers who build skills for Alexa make, on average, just $1,200 a month.<br><br>That may sound like a lot for an app, but most skills are built by third-party companies, meaning they spend far more than that on labor costs to build and maintain the skills.<br><br>Alexa has failed to become the main way brands and businesses interact with customers.<br><br>Most skills don't work very well and are prone to breakdowns and misunderstandings.<br><br>Amazon also fails to properly promote the skills, making it hard for developers to get their voice apps in front of Alexa users.<br><br>They also don't make it easy to attach Alexa to more devices, such as fridges and cars where users may actually want to use them.<br><br>Another major problem is Amazon’s failure to get Echo and Alexa into cars, which is where voice AI is most useful.<br><br>Tesla CEO Elon Musk talked about the opportunity to put voice AI in cars during a conference at the company headquarters last week.<br><br>Tesla has the largest market share of any car company in terms of voice AI, and Musk said it retains customers by offering them a “digital AI assistant that is connected to every aspect of their daily lives.”<br><br>Amazon has lost car deals with Volkswagen and Toyota.<br><br>Google has won most of the car deals and is expected to control the market, especially because it has far better mapping technology.<br><br>Amazon has also failed to generate more money from Echo, despite it being a highly successful product.<br><br>Echo smart speakers are dirt cheap, and Amazon just recently discounted them by 40% for Prime Day.<br><br>But the Echo business is also being heavily disrupted by the popularity of Generative AI.<br><br>Most of the questions users ask Alexa are basic queries about the weather, music and news, and ChatGPT has become far better at answering those queries.<br><br>Amazon is also facing increased competition from Apple, which is focusing more on smart home devices.<br><br>Alexa is also facing increasing competition from Google and Microsoft, which have more sophisticated voice AI tech.<br><br>Insiders are worried that without greater sales from Echo and Alexa, the division won’t be able to become profitable, even if it becomes a smart home business.<br><br>But insiders also agree that Amazon can’t kill Alexa even if it wanted to.<br><br>Because of its reach and massive customer base, Alexa is still the best platform for developers to get their products to customers.<br><br>The Information:<br><br>Here are the main points from the article:<br><br>Alexa is on life support and bleeding money.<br><br>Insiders estimate that Echo and Alexa will lose $10 billion this year, with no clear plan to stop the bleeding.<br><br>Amazon has failed to generate sales from skills and attach Alexa to more devices, such as cars and fridges.<br><br>Tesla has the largest market share in car voice AI, and Google is winning most car deals.<br><br>Amazon is facing increased competition from Apple, Google, and Microsoft.<br><br>Despite this, Alexa is still the best platform for developers to get their products to customers.<br><br>Even with its financial woes, it looks like Alexa will limp on.